ING analysts expect the euro to weaken further against the dollar, citing excessive ECB tightening bets and limited G7 summit impact.
EUR/USD is likely to retest 1.1600 rather than recover to 1.1700 in the near term, as excessive European Central Bank tightening expectations weigh on the pair. Analysts argue the ECB must maintain a hawkish stance to control long-end yields, but this does not fully offset downside risks.
Current market pricing includes 73 basis points of tightening in the 2026 overnight index swap curve, which ING deems excessive. The ECB is unlikely to push back against these expectations until geopolitical risks, such as a potential reopening of the Hormuz Strait, become clearer.
The ongoing G7 summit in Paris is not expected to deliver market-moving outcomes, limiting near-term support for the euro. Broader USD strength further increases the likelihood of a move toward 1.1600.